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gold price suppression

The link on the Sharps Pixley website to the above article doesn’t seem to be working and readers can’t access it at the moment, so here’s a second copy of the original article:

GATA Points to ‘Proof’ of Gold Price Suppression Intent

It has long been claimed that the gold price, along with virtually every other traded market, is manipulated by financial interests which can lay hands on sufficient funds, or credit, to be able to do so. That is an unfortunate aspect of the capitalist system and tends to benefit the big money, mostly at the expense of the small investor. But since its formation in 1998 the Gold Anti-Trust Action Committee (GATA) has gone a stage further with its claims that not only is the gold price manipulated (which suggests it can be pushed up as well and down), but that there is collusion by big money (mainly the bullion banks), central banks and governments to go a stage further and keep the gold price SUPPRESSED, given that a rising gold price is seen by the financial markets as a sign of weakness in the almighty dollar and in the global economy. That runs counter to the impression that governments wish to portray.

From time to time GATA has also managed to acquire documents which support its point of view in terms of memos from some key figures, particularly from the US Treasury and Federal Reserve, which would appear to support the idea of a gold price suppression policy. And now it has just been involved in publishing a document, dating back to the early 1970s, which has just appeared in the TF Metals Report, citing a cable obtained by Wikileaks.

The cable, according to GATA, suggested that the U.S. gold futures market was created in December 1974 as a result of collusion between the US government and gold dealers in London to facilitate volatility in gold prices and thereby discourage gold ownership by US citizens. That is perhaps an arguable contention as it perhaps rather points out the consequences of a change in US policy in allowing citizens to own gold.

The cable was sent to the State Department from the US Embassy in London and describes the embassy’s extensive consultations with London bullion dealers about the imminent re-legalization of gold ownership in the United States and possible substantial gold purchases by oil-exporting Arab nations.

The cable reads: “The major impact of private U.S. ownership, according to the dealers’ expectations, will be the formation of a sizable gold futures market. Each of the dealers expressed the belief that the futures market would be of significant proportion and physical trading would be minuscule by comparison. Also expressed was the expectation that large-volume futures dealing would create a highly volatile market. In turn, the volatile price movements would diminish the initial demand for physical holding and most likely negate long-term hoarding by U.S. citizens.”

The cable is interesting not just for confirming the assertions by GATA and others in the gold-price suppression camp that futures markets also function as mechanisms of commodity price suppression and support for government currencies, an assertion perhaps first made comprehensively in 2001 by the British economist Peter Warburton, but also for showing the close connection at the time between the U.S. government and London-based gold dealers and producers, some of which are cited by name. Those cited include Samuel Montagu & Co., Sharps Pixley & Co., Mocatta & Goldsmid, and Consolidated Gold Fields. The first three mentioned were at the time London’s largest bullion dealers and the latter was in effect, mainly through its South African subsidiaries and associates, the world’s largest miner of gold.

It should be noted, however that none of the above cited companies exist in their original form nowadays, and, except perhaps for Mocatta’s successor, can no longer be considered part of any grouping which exerts any significant effect on the gold price today. The following is a note to set the record straight on this given that the companies quoted may well have had a major influence in the markets around four decades ago.

Thus, Samuel Montagu is no longer a bullion dealer/broker, but now just forms part of the private banking service of HSBC. The name was actually last used by HSBC in 2000. But its former precious metals broking activities will now form part of HSBC’s continuing business – but not under the Samuel Montagu name.

Sharps Pixley was bought by Kleinwort Benson and then by Deutsche Bank which effectively closed it down. Subsequently the name was acquired by current CEO, Ross Norman, who relaunched the company around six years ago as a website portal to sell gold in UK markets, as well as providing news and information about the precious metals markets. In 2013 Sharps Pixley was acquired by Degussa Goldhandel from Germany which claims to be one of the largest sellers of retail physical gold in Europe, but the Sharps Pixley end is still run by Ross Norman. It recently launched a state of the art retail bullion shop/outlet in London’s prestigious St. James Street.

Mocatta & Goldsmid is now ScotiaMocatta, the precious metal and base metal banking division of the Bank of Nova Scotia, while Consolidated Gold Fields was originally the controlling entity for the gold mining company that is now Gold Fields of South Africa.

The abovementioned cable from the US Embassy in the UK to the State Department perhaps does not quite provide ‘proof’ of US Government involvement in actual gold price suppression, but is yet another piece of circumstantial evidence that it was certainly aware of the likely effects of the futures market on the gold price pattern and may well have colluded in this as being in its best interests.

There is a continuing argument over whether the gold price is manipulated and we feel that it is – along with virtually every other market out there – by institutions with sufficient funds to exert a degree of control. That seems to be an integral part of the modern-day investment sector, whether ethical or not.

But is gold a special case? Or is silver? Investors in these precious metals certainly believe so and we feel there is sufficient evidence out there to say definitely yes – at least from time to time when for the powers that be things start to be getting out of hand as they see it. Why should gold in particular be a special case?

In many peoples’ eyes gold has been the ultimate form of money and indicator of wealth for centuries and since the world entered the total fiat currency era after President Nixon closed the gold window in 1971, before which the world’s global reserve currency was backed by gold, many still see gold as the ultimate bellwether as an indicator of the true strength of these currencies and of the dollar in particular. Control the bellwether and you control the herd!

The Gold Anti Trust Action Committee (GATA) has preached gold price suppression, implemented by the major central banks (the U.S. Fed in particular) with government support allied with the monetary power of the bullion banks to do so and has been very successful in procuring various government documents, memos and emails which would support their case. This documentation recognises that at various points in time gold has most certainly been on the agenda and needs to be controlled with recognition by the financial elite that the gold price can pose a threat to their economic management and the overall picture they are tryuing to present to the people. Couple this with ongoing media propaganda downplaying gold’s power as an investment and such intervention can probably be kept to a minimum with investors and markets doing much of their dirty work for them most of the time.

But not all of the time! Every now and then the gold price threatens to get out of control and more drastic measures are needed to knock it back. Hence the flash crashes when huge futures transactions, often when major markets are mostly closed, are implemented with the seemingly intended purpose to knock prices sufficiently to trigger stop-loss computer trading and thus drive the price down further. these are a relatively recent phenomenon perhaps exemplified – one might say trialled – in the much smaller silver market back in April 2011 when the silver price was soaring up close to $50 an ounce. While silver may no longer be truly a monetary metal it still has monetary correlations in the eyes of many and while the silver price tends to move broadly in concert with gold, but with greater extremes, there would have been the fear that in this case the tail could be wagging the dog and if the silver price was allowed to continue its upwards path it could drag gold along with it.

But while the silver price was successfully knocked back, gold managed to continue on its own upwards path for another 5 months and in August/September 2011 gold fever was in full swing and it too looked to be taking off out of control. Cue another huge flash crash and the amount of capital at risk in the futures markets to implement this might be seen as exceptional with the theory that this was put in place by the bullion banks with central banks and government support. True only circumstantial evidence here, but the numbers suggested something hugely more than any normal trading activity.

Once this was seen to be successful, so the theory goes, almost every time some piece of government data, or world news, seen as potentially strongly gold positive has been released there has been an almost instantaneous similar, but smaller, flash crash implemented through big futures transactions – always seemingly designed to take the price down to stop-loss selling levels. Coupled with a Fed easing programme designed to boost the general stock markets these have turned investor sentiment away from gold very successfully and the price has been drifting downwards.

So what next for gold? The gold investment fraternity will be hoping that the huge gold flows from West to East and the likely prospect of China eventually wresting control of gold benchmark price setting from London will reduce the power of COMEX futures market dominated price manipulation. But China itself may then well set its own price manipulation process in place – it certainly has the financial power to do so -although the agenda and price direction may be different! We shall see.